Issues: Audit of corporate tax return; "Overpayment" interest; 26 USC §§ 6611(b)(1) & (2); Rev. Proc. 84-58, 1984-2 C.B. 501 (superseded by Rev. Proc. 2005-18, 2005-1 C.B. 798); Jurisdiction; 28 USC § 1346(a)(1); E.W. Scripps Co. v. United States; Library of Congress v. Shaw; Canon of "strict construction"; Lane v. Pena; Whether plaintiff had a "substantive right to interest"; United States v. Mitchell; "Sovereign immunity"; United States v. Sherwood; "The date of the overpayment"; Statutory interpretation; National Air Traffic Controllers Ass'n v. Department of Transp.; Menuskin v. Williams; Overpayment defined; Jones v. Liberty Glass Co.; 26 USC § 6401(c); Dolan v. U.S. Postal Serv.; Rev. Proc. 84-85 § 4.02.1; "Use-of-money principle"; Marsh & McLennan Cos. v. United States (Fed. Cir.); FleetBoston Fin. Corp. v. United States (Fed.Cir.); Rev. Proc. 84-58 § 5.05; "Retroactive conversion"; Lamie v. U.S. Trustee

Court: U.S. Court of Appeals Sixth Circuit

Case Name: Ford Motor Co. v. United States

e-Journal Number: 58231

Judge(s): Gibbons, Batchelder, and Rogers (except as to Part III.A); Concurrence – Rogers


[This appeal was from the ED-MI.] Plaintiff-Ford Motor was not entitled to interest on a tax refund for the period when its funds remitted to the government were classified as "deposits," and not as "advance tax payments." Ford paid the United States Treasury hundreds of millions of dollars for allegedly unpaid taxes, designating the funds as "deposits in the nature of a cash bond[,]" a type of payment that does not bear interest in the event of an overpayment. At a later date, Ford "asked the government to convert its remittances into 'advance tax payments,'" which "do bear interest in the event of an overpayment." The government performed an audit and determined that Ford had overpaid its taxes and refunded Ford's payments with interest. "But the government refused to pay Ford any interest for the period during which the United States held Ford's money as deposits - before the remittances were converted to advance tax payments." Ford demanded approximately $450 million in additional interest. The court first affirmed jurisdiction over the case, noting that § 6611, "which specifically permits taxpayers to sue the government for overpayment interest, constitutes an express congressional waiver of the government's immunity from suits to recover interest." The court then addressed "whether § 6611 is a waiver of sovereign immunity that must be strictly construed," and concluded that there was "no basis in the Supreme Court's sovereign-immunity jurisprudence for applying the canon of strict construction to interpret the word 'overpayment' in § 6611 to bar taxpayers from demanding interest on remittances that are designated as deposits in the nature of a cash bond." The court applied "the usual tools of statutory construction to determine whether 'the date of the overpayment' under § 6611 was the date Ford remitted its deposits," as Ford asserted, "or the date the IRS converted its deposits into advance tax payments," as the government argued. The court rejected Ford's "use-of-money principle" and "retroactive-conversion" arguments, and concluded that "Ford's cash-bond deposits were not payments, and therefore were not overpayments, because Ford did not remit those deposits to discharge its estimated tax deficiency. Rather, Ford's decision to designate its remittances as deposits rather than advance tax payments demonstrates that the sole purpose of the remittances was to stop the accrual of underpayment interest. The IRS properly refused to award Ford any interest for the period during which the United States held Ford's remittances as cash-bond deposits." Thus, the court affirmed the district court's decision upholding the IRS's calculation of Ford's overpayment interest.


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